The ASX 200 was down 0.27% or 19.3 points to 7,071.7 as of 1:15 pm AEST today, having recovered from an even sharper fall early in trading this morning.
Hotter-than-expected US inflation data and an unsettled bond market stopped US markets in their tracks overnight, sending the ASX falling 1% not long after the opening bell this morning before a stepped recovery brought it into a more stable trajectory.
The ASX sectors consequently struggled today, with only Healthcare (+0.95%) and Utilities (0.38%) making any kind of positive showing while Real Estate (-1.48%) took the brunt.
Commodities were a mixed bag today, with critical minerals palladium and platinum shedding more than 2.5% each but nickel gaining 1.45% and tin 1.11%.
Oil was in the green but flat, adding only 0.25% to bring weekly gains to 1.14%.
Market sentiment backflips on US inflation data and Treasury auction
Capital.com senior financial market analyst Kyle Rodda explains the effect of stubborn US inflation in September, with headline CPI remaining at 3.7% year-on-year.
“The more critical core inflation read fell to 4.1% as expected, suggesting the underlying pulse in the US economy is heading in the right direction,” Rodda wrote in a market report.
“However, that headline number is the one that best reflects the consumer experience of the economy and presents risks to inflation expectations.
“The CPI numbers dampened sentiment. However, a 30-year US bond auction turned it bearish.
“The event saw the market clear at a yield higher than expected, with several signs of tepid demand and a relatively soft 2.3 bid-to-cover ratio.
“It raised fresh fears about (modest) funding pressures in the market as the government looks to fund deficit spending.
“It also points to the greater compensation investors are for to account for future growth and inflation and hints at persistent, or 'higher for longer', rate settings.”
(US Treasury Actives Curve Source: Bloomberg)
“The dynamic pushed US stocks lower and drove a surge in the US dollar amid clear signals the US economy is running too hot and dollar liquidity may be relatively scarce,” Rodda explained, “The AUD/USD tumbled 1.5%; Asian markets are poised for a weak open.”
(AUD/USD)
“Attention turns to Chinese price data today, but the markets are looking for signs of persistent deflation in the economy.
“Forecasters expect consumer and producer prices to tick up to 0.3% and -2.4%, respectively, as the deflationary forces ease but barely reverse.
“Given the shift in language from China's central government about more significant fiscal stimulus and assertiveness to reach its growth target, investors will welcome signs that the data provides ample scope to allow for more of it.”
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